Compute the fair value of the following three stocks. Assume cost of equity to be 10% Stock A is expected to pay a uniform dividend of Rs. 3.50 per share forever. Stock B is expected to pay a dividend of Rs. 2.00 per share next year. Dividends are expected to grow at 5% YOY per year forever. Stock C has paid a dividend of Rs. 2.50 per share in the current year. The dividend is expected to increase by Rs. 0.50 per year for the next three years. Thereafter, dividend is expected to remain constant.

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Stock A Fair value 3500 Since Stock A is expected to pay a constant dividend of 350 per share foreve... View the full answer